Cash From China Seized Due to Capital Controls

Late last year, we wrote about Chinese nationals taking their cash out of the country by the suitcase. A suitcase full of cash coupled with a failure to report that cash to Customs will result in a seizure. We receive calls frequently from people who have had their cash from China seized by U.S. Customs & Border Protection (CBP).

But why do folks risk getting cash from China seized? Another story in the Wall Street Journal called “In Reversal, Cash Leaks Out of China” from way back in 2012, explains it; capital controls limit how much money can be taken out of the country, which has led to the create of an industry of service providers that help Chinese take cash out of the country, for those who don’t have the courage (or are too smart) to carry it out in a suitcase. For those who want to read more, there is also great article about Chinese capital controls.

Here’s excerpts from the Wall Street Journal article, with my emphasis in bold:

Wealthy Chinese citizens are buying beachfront condos in Cyprus, paying big U.S. tuition bills for their children and stocking up on luxury goods in Singapore, frequently moving cash secretly through a flourishing network of money-transfer agents. Chinese companies, for their part, are making big-ticket foreign acquisitions, buying up natural resources and letting foreign profits accumulate overseas.

[ . . . ]

China officially maintains a closed capital account, meaning it restricts the ability of individuals and businesses to move money across its borders. Chinese individuals aren’t allowed to move more than $50,000 per year out of the country. Chinese companies can exchange yuan for foreign currencies only for approved business purposes, such as paying for imports or approved foreign investments.

In reality, the closed system has become more porous and the rules are routinely ignored. “The wealthy in China have always had an open capital account,” says Eswar Prasad, a Cornell University economist and former International Monetary Fund official.

Zheng Nan recently spent €300,000 ($390,000) on a beachfront condo in Cyprus. At 50 years old, he says he is retired from selling telecommunications gear in China for foreign manufacturers. “My plan is to spend winter there because of the pollution in Beijing,” he says. “And we will be back for summer.”

China’s $50,000-a-year limit on moving capital out presented a problem for him. He says he got around the restriction by recruiting friends to move chunks of his money under their own names. Real-estate agents in China say that is a common practice that is largely tolerated by authorities.

[ . . . ]

A sprawling industry has developed to help Chinese get money out. Services range from the money-transfer agents to private jets that ferry money by customs officials unmolested, according to lawyers and brokers who help Chinese investors find investments abroad. Sometimes bank transfers by companies hide personal money being moved out, these people say. Another method is to piggyback personal cash atop legitimate export and import transactions, at times by using fake invoices, they say. People even carry bags of cash across the border.

“We suggest them to other people, some special channel, that can exchange money outside the banks, outside supervision,” Mr. Zhang says. “It’s not hard for people to solve this problem.”

Cyprus has become a popular investment destination for wealthy Chinese. The island nation in the Eastern Mediterranean gives permanent European Union residency to anyone who spends €300,000 on a property.

“People in China are rich,” says Arthur Cheung, a Hong Kong-based immigration consultant who matches Chinese buyers with foreign property sellers, including from Cyprus. “They just buy a passport or permanent residency like a Louis Vuitton bag.”

Was your cash from China seized?

The process of getting undeclared currency seized by CBP back is long and complicated; most importantly, legitimate source and intended use must be proven. If you had cash from China seized , you can learn more about the process from our trusted customs money seizure legal guide and can contact us for a free currency seizure consultation by clicking the contact buttons on this page.

Great Lakes Customs Law

The customs law firm represents importers, travelers, and brokers in administrative proceedings before US Customs & Border Protection (USCBP) and at the Court of International Trade and Federal district court.